Empty Property Rates - £1.1 Billion Tax Bombshell

Empty Property Rates – £1.1 Billion Tax Bombshell

The taxpayers Alliance have reported that a massive £1.1 Billion (GBP) was paid last year in Business Rates on empty properties, a rise of 19% between 2009/10 and 2011/12

This is the first time that a figure has been calculated for the amount collected in empty property rates since exemptions for empty commercial and industrial properties were abolished at the 2007 Budget.

Before 2007, empty industrial properties were exempt from Business Rates and empty commercial properties were subject to extensive reliefs and reductions.

Apart from a short exemption period and extremely limited reliefs, full Business Rates are now payable on all empty commercial and industrial properties.

With the economic downturn making it increasingly difficult for commercial landlords to find new tenants, this tax has had some devastating effects:

  • Some landlords have had to resort to demolishing commercial properties rather than paying the full empty property rates while unable to find new tenants
  • Some pensioners who have bought commercial units as a means of supplementing their retirement income are facing economic ruin after being hit by crippling empty property rates bills.
  • A number of senior members of the Coalition Government were vocal in their criticism of this tax on empty property while in opposition.

Business Secretary Vince Cable described empty property rates and taxing an empty property in a recession as “a ludicrous situation, completely counterproductive and economically very damaging” while Education Secretary Michael Gove said that removing empty property rate relief was “universally recognised as a wicked and ungodly act”

Department for International Development minister, Alan Duncan, warned that removing the tax relief for empty property rates was “bringing to a grinding halt any kind of activity for preparing business premises or developing wrecked premises for future use”, noting that “taxing something that generates no revenue does enormous damage”

However the coalition government have as yet failed to address the issue of empty property rates.

The report includes a figure for the amount collected in empty property rates by every council in England, Scotland and Wales over the last three years.

One example was reported in last week’s Lancashire Evening Post, an excerpt of which is below:

Nearly £3 Million (GBP) was collected from commercial landlords in Preston under the empty property tax in the past year, new figures have shown.

The city paid out £2.73 Million (GBP) in business rates for empty properties between 2011 and 2012 which was a drop of nearly a million from three years previous when landlords were paying £3.5m in the tax.

In neighbouring South Ribble, the cost to landlords has rocketed to £797,736 (GBP) from £501,448 (GBP) the previous year and Chorley also saw the cost rise to £807,902 (GBP) from £465,397 (GBP).

Danny Pinkus, managing director at commercial property agents Robert Pinkus and Co, said the fall in Preston was because “Landlords are finding ways around the tax. It is a tax on someone’s inability to let a building and these figures are frightening, if not surprising. There is so much empty space in Preston at the moment that even though we are seeing increasing levels of activity, the figures were always going to be high. You have property owners, many of which will be owner occupiers rather than property tycoons, who are not able to meet mortgage repayments on their property because they cannot rent them. For these people it is a double whammy.”

Matthew Sinclair, Chief Executive of the TaxPayers’ Alliance, said: “It is extremely unfair that property owners are being hit with enormous Business Rates on properties which are empty, with no rent coming in that they can use to pay the bill. There are elderly people who invested in a small commercial or industrial unit in the reasonable expectation that the rent would top up their pension. This new tax is ruining them. The rest of us lose out as the mere threat of having to pay rates on empty properties is discouraging people from putting money into new developments or refurbishing existing properties, which is undermining the prospects for economic growth. As the true scale of this ugly tax becomes apparent, Ministers cannot keep ignoring their own rhetoric in opposition and leave it in place.”

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